The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Baha Mar’s current owner is voicing increasing concern that it will be sucked into a legal battle with the Attorney General’s Office after failing to obtain an injunction to block Sarkis Izmirlian’s document demands.

Legal papers obtained by Tribune Business reveal that Chow Tai Fook Enterprises (CTFE) and its affiliates have failed to persuade the Delaware Chancery Court to bar Baha Mar’s original owner from issuing a request for judicial assistance to The Bahamas and its Supreme Court.

Attorneys for the Hong Kong-based conglomerate revealed in a July 2, 2021, letter that Chancellor Kathaleen McCormick refused to issue a temporary restraining order (TRO) against Mr Izmirlian and his Baha Mar Properties vehicle on the basis that it had “not made a sufficient showing that it... faced injury” as a result of further discovery demands.

As a result, Mr Izmirlian is presently free to seek further documents from CTFE’s Bahamian affiliate, Perfect Luck Assets, via the New York State Supreme Court to bolster his $2.25bn fraud and breach of contract claim against Baha Mar’s contractor, China Construction America (CCA).

However, CTFE and its affiliates are seeking to block any request for judicial assistance to The Bahamas on the grounds they have already provided “substantial files plus other data” to the original Baha Mar developer. And they are claiming Mr Izmirlian agreed not to seek additional evidence from its Bahamian or other affiliates, and is now breaching this September 2020 deal.

Should the New York State Supreme court issue the request for judicial assistance, CTFE is fretting that it will have to oppose this application in the Supreme Court. This will pit it against the Attorney General’s Office, which represents so-called “requesting states” in matters involving the Evidence (Proceedings in Other Jurisdictions) Act.

“Thus if the proposed letter rogatory is endorsed and acted upon in such a manner, Perfect Luck will face potentially expensive and burdensome litigation in The Bahamas – all opposite The Bahamas’ Attorney General,” CTFE argued in legal papers seen by this newspaper.

“And although Perfect Luck reserves its right to make such objections as may be appropriate, it will be litigating against The Bahamas Attorney General – not Baha Mar Properties.” CTFE alleged that Mr Izmirlian and his attorneys have now adopted “a ‘hands off’ approach” to the judicial assistance request, adding: “All of this indicates a consciousness of how the injury to Perfect Luck will unfold.

“Having lodged the proposed letter rogatory, Baha Mar Properties evidently plans to ‘sit back’ and let events unwind, all to Perfect Luck’s prejudice - that the Supreme Court of New York will endorse it and that The Bahamas’ attorney general will execute it.

“The only party that can arrest this course of events is Baha Mar Properties itself. It is incumbent upon Baha Mar Properties to go the Supreme Court of New York, admit the promises it made in the letter agreement and withdraw the proposed letter rogatory,” CTFE alleged.

“If the proposed letter rogatory is issued, the obligation transforms into an obligation to request that the Supreme Court of New York rescind the proposed letter rogatory. Only through such means will Baha Mar Properties put itself back into conformity with its contractual obligations and reverse the harm that it has caused to CTFE and Perfect Luck.”

Communications between Perfect Luck, which was acquired by CTFE, and Baha Mar’s provisional liquidators; receiver-managers; and its China Export-Import Bank owner are Mr Izmirlian’s targets, along with details on the revisions made to the construction contract with CCA after Mr Izmirlian was removed as the project’s developer.

CTFE’s attorneys, alleging that this breaches the agreement with Mr Izmirlian, reveal in their letter that the latter initiated legal proceedings in the Delaware Superior Court in October 25, 2019, to obtain documents and files from both its US and Bahamian affiliates - including Perfect Luck and Baha Mar’s immediate owner, CTF BM Holding Ltd.

The two sides ultimately engaged in “cordial and productive” negotiations whereby CTFE’s Delaware subsidiary “caused the Baha Mar affiliates to produce substantial files to BML Properties, plus other data”.

“A condition of the signed agreement, which is governed by Delaware law, was that BML Properties would not seek document discovery in any forum (including in The Bahamas) from the CTF Baha Mar affiliates that had been requested in the Delaware subpoena,” CTFE’s attorneys wrote.

“In recognition that CTF Delaware had complied with the agreement, BML Properties voluntarily dismissed with prejudice the Superior Court action governing the Delaware subpoena on February 2, 2021.” However, Mr Izmirlian then sought judicial assistance from The Bahamas on April 4, 2021, barely two months later.

The documents plaintiff [Mr Izmirlian] is seeking from Perfect Luck are central to this matter,” the New York court said in its judicial assistance request. “Defendants’ [CCA] alleged fraud and delay resulted in the Government of the Bahamas initiating liquidation proceedings, and the Export-Import Bank of China, which had partially financed the project, initiating receivership proceedings, seizing plaintiff’s interest in Baha Mar, and selling Baha Mar’s assets to Perfect Luck, a Chinese entity owned by Export-Import Bank of China.

“Perfect Luck thereafter re-engaged defendants as construction manager, awarded them lucrative work packages, and attempted to amend the contracts that had originally governed the parties’ relationship. Perfect Luck’s documents are therefore material to defendants’ intentional and knowing conduct to remove plaintiff from the project and attempt to strip plaintiff of its rights to the benefit of defendants.”